“New construction,” says Jon Runstad, chairman and CEO of Wright Runstad & Co., “is a function of the economy.” And, he emphasizes, we here in the Puget Sound region are “not immune from the national economy.”

Jon Runstad

Runstad describes his firm’s perspective as “cautious” in light of the recent slowing of national economic indicators. But looking back over 2000, he says his firm had a heck of a run.

“It was an exceptional year in just about every respect. The properties in which we have an interest have all been full for all practical purposes.”

To emphasize the strength of the last few years, Runstad notes that in the 15-month period ending in May of 2000, Wright Runstad delivered seven projects totaling 2.4 million square feet. Of that total all but 30,000 square feet was committed upon delivery.

Of course, he says, “That kind of leasing is the exception.”

For 2001, Runstad says that vacancy will go up on both sides of the lake. In particular, he feels that there’s more risk of increasing vacancy on the Eastside.

“There’s a lot more construction in Bellevue with uncommitted space.” On the west side of the lake most new space coming online is committed.

Runstad thinks that sublease space will contribute to the vacancy rate on both sides of the lake, but more so on the Eastside.

“On the Eastside,” he says, “there’s a higher percentage of tenants with less creditworthiness.”

Runstad says that his firm has been pretty cautious on credit risks.

As for rents, Runstad sees them remaining pretty flat. “We’re not projecting increases of any significance.” In some cases, he says, “Rates will be down, but down from high peaks.”

As for concessions, right now Runstad says the market is seeing a little bit of discounting, but almost all of it is in sublease space.

There won’t be a lot of new construction in 2001 either.

“In general, caution will be imposed by lenders, especially construction lenders,” Runstad says. The standards for new projects will be pretty difficult to meet.

But after the last few robust years, Runstad feels that’s healthy.

“To start a new project you’re going to have to have commitments.”

In a broader look at the future, Runstad says, “I don’t think anybody knows if we’re going into a recession or a soft landing. One of the encouraging things I’ve seen so far is what’s happening to new job growth, the ultimate driver of our business.”

The correlation is a direct one: without new jobs, there’s no need for new office space.

“People losing jobs, at least at some level, have been able to find new jobs very quickly. That’s the most important thing to watch,” he says.